Abstract

This paper analyzes the institution of benefit payments from the constitutional economics point of view. Benefit payments cannot be legitimized only by the veil of uncertainty about the personal future income position. From the constitutional economics perspective, they are only justified if externalities of poverty as a genuine public good problem are taken into account. A system of public benefit payments raise up two problems: first it has to overcome the problem of free-riding with regard to transfer payments, and secondly it should not provide incentives for the beneficiary to restrain the own efforts to work. Hence a double commitment is necessary: On the one hand, this commitment must regulate, in which way a citizen is engaged in the financing transfer payments, and on the other hand it has to include obligations for the potential recipients of the transfer payments to immediately return to working life.